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The process for setting the London 2012 Games budget has been thorough, the National Audit Office says today, but the level of public funding has increased greatly, and significant areas of uncertainty remain including the finalisation of the design of venues and the intended wider benefits.

These are the main findings in a new report by the Comptroller and Auditor General which examines the development of the budget for the Games.

At the time of the bid to host the Games the estimated gross cost was just over £4 billion, to be met by £3.4 billion in public funding and an anticipated £700 million from the private sector. The budget announced in March 2007 is now over £9 billion. It includes a number of new costs and provisions which account for much of the increase from the time of the bid, including the Olympic Delivery Authority’s programme management budget, contingency, tax and security.

The budget also includes a £6 billion increase in the public funds required to fund the Games set against a significantly reduced level of anticipated private sector funding (now £165 million). Over £1 billion of this increased funding is to meet the Games’ potential tax costs and would therefore flow back to the Exchequer. Today’s report states that the revised funding package is sufficient to cover the estimated costs of the Games, with the important proviso that the assumptions on which the budget is based hold good.

The report found that the budget process followed since London was chosen to host the Games has been thorough, and the judgements and assumptions made by the Department for Culture Media and Sport have been informed by detailed analysis and expert advice. There are, however, remaining areas of uncertainty including design specifications which have not yet been finalised, the impact of construction price inflation and how potential suppliers will respond to invitations to bid for work. The degree of uncertainty is reflected in the high level of contingency (32.7 billion) which has been provided.

The report makes recommendations to manage risk in relation to the budget. Those which require immediate action are:

• Producing a statement of deliverables including the venues, infrastructure and wider benefits expected in return for the £9 billion public finding, including time, cost and quality assumptions
• Producing a more robust estimate of contingency
• Being clear about the timing of Olympic Delivery Authority funding so it is not delayed in taking forward its programme

Notes for Editors

1. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk.  Hard copies can be obtained from The Stationery Office on 0845 702 3474.
2. This is the second in a series of National Audit Office reports on the preparations for hosting the London 2012 Olympic and Paralympic Games. The first report on the preparations for the Games set out the main areas of risk that need to be managed to achieve the successful delivery of the Games. It can be downloaded from www.nao.org.uk/publications.  
3. In recognition of the National Lottery’s contribution to the Games, the Government and the Mayor of London have put in place arrangements for sharing the profits that are expected to be generated from sales of land and property following the Games. The arrangements are set out in a revised memorandum of understanding between the Government and the Mayor of London (27 June 2007), and include an estimate of the receipts that the Government expects to be available for repayment to the Lottery (some £675 million). The precise value will be dependent on prevailing market values at the time.
4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.